SEC v. Laigo

SECURITIES AND EXCHANGE COMMISSION v. HON. REYNALDO M. LAIGO, GLICERIA AYAD, et. al. Gr. No. 188639, 2 September 2015, SECOND DIVISION, (Mendoza, J.) Assets in the trust fund shall at all times remain for the sole benefit of the planholders. The trust fund assets cannot be used to satisfy claims of other creditors of the pre-need company. Legacy Consolidated Plans, Inc. (Legacy), being a pre-need provider, complied with the trust fund requirement of the petitioner, Securities and Exchange Commission (SEC), and entered into a trust agreement with the Land Bank of the Philippines (LBP). The industry collapsed and Legacy was unable to pay its obligation to the planholders.. Private respondents, as planholders, filed a petition for involuntary insolvency against Legacy before the the Regional Trial Court (RTC). Accordingly, Legacy was declared insolvent and was ordered to submit an inventory of its assets and liabilities pursuant to the Insolvency Law. The RTC ordered the SEC to submit the documents pertaining to Legacy's assets and liabilities. The SEC opposed the inclusion of the trust fund in the inventory of corporate assets on the ground that to do so would contravene the New Rules on Registration and Sale of Pre-Need Plans which treated trust funds as principally established for the exclusive purpose of guaranteeing the delivery of benefits due to the planholders. It was added that the inclusion of the trust fund in the insolvent's estate and its being opened to claims by nonplanholders would contravene the purpose for its establishment. Despite the opposition of the SEC, respondent Judge Reynaldo M. Laigo (Judge Laigo) ordered the insolvency Assignee to take possession of the trust fund. Judge Laigo viewed the trust fund as Legacy's corporate assets and included it in the insolvent's estate. The SEC contended that Judge Laigo gravely abused his discretion in treating the trust fund as part of the insolvency estate of Legacy. It argued that the trust fund should redound exclusively to the benefit of the planholders, who are the ultimate beneficial owners. ISSUE: Can the trust fund be used to satisfy the claims of other creditors of Legacy? RULING: No. The contention of SEC finds support under Section 30 of the PreNeed Code where in it clearly provides that the proceeds of trust funds shall redound solely to the planholders. In no case shall the trust fund assets be used to satisfy claims of other creditors of the pre-need company. It must be stressed that a person is considered as a beneficiary of a trust if there is a manifest intention to give such a person the beneficial interest over the trust properties. This categorical declaration doubtless indicates that the intention of the trustor is to make the planholders the beneficiaries of the trust

properties, and not Legacy. It is clear that because the beneficial ownership is vested in the planholders and the legal ownership in the trustee, LBP, Legacy, as trustor, is left without any iota of interest in the trust fund. Legacy is out of the picture and exists only as a representative of the trustee, LBP, with the limited role of facilitating the delivery of the benefits of the trust fund to the beneficiaries -the planholders. The trust fund should not revert to Legacy, which has no beneficial interest over it. Not being an asset of Legacy, the trust fund is immune from its reach and cannot be included by the RTC in the insolvency estate.